S&P upgrades Worcester's bond rating

Saturday

Oct 19, 2013 at 6:00 AM

By Nick Kotsopoulos, TELEGRAM & GAZETTE STAFF

WORCESTER — Wall Street has signaled a further growing confidence in the city's fiscal health, as one of the three major independent credit agencies has upgraded Worcester's bond rating while the other two have maintained their previous ratings.

Standard & Poor's has upgraded the city's municipal bond rating to AA-, up a notch from the previous year, when it assigned Worcester a bond rating of A+, and up an unprecedented three grades in the past two years.

The AA- rating is the fourth highest investment grade given out by Standard & Poor's.

Meanwhile, Moody's Investors Service and Fitch Ratings have reaffirmed their bond ratings for the city from the previous year, with Moody's at Aa3 and Fitch at AA-.

In its credit report, Standard & Poor's said its rating upgrade was based on how Worcester's financial position has "improved substantially" over the past three fiscal years, thanks to improved financial management policies and controls, as well as a demonstrated commitment throughout the city to strengthen its financial reserves.

"We view the city's management conditions as strong, with good financial practices combined with a capable and experienced management team," Standard & Poor's wrote in its report. "Worcester has recently also demonstrated the capacity to execute key reforms to manage near- and long-term fiscal challenges."

City Manager Michael V. O'Brien said the strong credit ratings are a statement that the city, and its municipal bonds, are a solid long-term investment.

He said all three bond-rating agencies pointed to the city's robust revitalization progress and diverse tax base. They also highlighted the redevelopment progress at CitySquare, the intermodal transportation center at Union Station and the completion of the CSX expansion, the manager said.

"The credit rating process is extremely thorough and arduous, even more so since the global economic downturn that has persisted since fiscal year 2009," Mr. O'Brien said. "All aspects of our city government and our community are evaluated objectively through a strict set of criteria focused on management, year-to-year financials, long-term fiscal planning, resolution to long-term liabilities, and economic development."

Meanwhile, Mayor Joseph M. Petty said he was very pleased that the city's efforts to run a tight fiscal ship have been recognized by the bond rating agencies.

"The City Council and I have made a real commitment to the city's Five Point Financial Plan — to prioritize and plan thoughtfully for the future," Mr. Petty said. "The city continues to be a rock solid long-term investment. Our hard work continues to pay dividends."

Mr. O'Brien said a key to the city's bond-rating upgrade was the City Council's adherence to the Five Point Financial Plan, and its continued effort to build up financial reserves.

He said the council has made sure the city lives within its means by working with the city administration to deal with potential budget busters early on.

Mr. O'Brien said the city's general fund reserve, also known as a "rainy day fund," is now up over 5 percent of the municipal budget. In comparison, the city's reserves were at less than 1.9 percent before the start of the Five Point Plan in the fall of 2006

"We've been able to build up our reserves and make strategic infrastructure investments, all while in the midst of the worst economy since the Great Depression," the manager said.

District 2 City Councilor Philip P. Palmieri said while bond ratings are not terribly sexy to the public, they are of great importance because they reflect the financial stability of a community. He credited the city manager and City Council for working together to bring greater financial stability to the city government.